I love real estate as an investment class, but I must say, I do know of other investments that from time to time hold better returns than rental real estate.
Whoa! Hold on, mister!
I know…blasphemy! Talking about real estate’s downfall’s as an investment class can get one lynched over here…so I”ll tread lightly and prove my point.
Right now with all the government involvement, nobody knows where the real estate market is headed…at least not with enough predictability to make financial decisions that are significantly better than simple “guesses”.
Not so a year ago….back then I absolutely knew housing pricing were dropping and would drop at least another 25% in my area. I could plan investment strategies knowing this. But not now. The government has so deeply entrenched itself into the banking arena, I have no clue what banks will do with their mounting foreclosure portfolios.
Will the borrowers get “bailout” money from the Feds? If so, then the banks just need to wait. This waiting will kill the current “short sale” market…the only existing home sale market in many California areas which is responsible for setting new lower prices for entire neighborhoods.
This is really disheartening…as a real estate investor, I wish the Feds would get their fingers out of the banking system, and quit trying to “save” the real estate market. The only thing that will save the real estate market, much like what is said about alcoholics, is hitting bottom.
“Hitting Bottom”…it’s an ugly term.
It reminds us, we can get collectively “drunk” and take the real estate market with us on some symbiotic roller coaster ride to the dark side where the party can kill. This is where we meet the Wall Street MBS investors who sacrificed intelligent underwriting for greed, who get us started with a few tequila shooters on an empty stomach before sending us to meet the Life of the Party, Fannie and Freddie! Those two kept us plied with drinks until the wee hours of the morning.
But the morning comes whether we like it or not…and lying beside us…the ugliest borrower ever! Coyote Ugly…if you know what I mean. Waking up next to a mortgage “date” that has no income, or credit, or looks or body…and who once awake, claims “you forced the loan”….when in reality the exact opposite was true…screams, “I’ve hit bottom”. You know you’ve hit bottom when all you want to do is take a shower and start over.
But in the name of “helping”, the Feds step in and deny you that shower and the ability to start over. They talk about rehab, second chances, bailouts, and regulation instead of the more effective “going broke”, “losing your house”, and “filled with shame” self-regulation that should rule the day.
Instead of hitting bottom, we’re left to hang in limbo – shame intact – waiting for the now much more distant day this will all be over.
And that’s why I think investing any further in the real estate market is too risky!
Next week, I’ll tell you my perfect investment that mimics many of the pluses of the “old” real estate market and is the right investment vehicle for these uncertain times…
Photo Credit: danflo